An analysis conducted by Marie and Jerry Thursby for the National Academies Government-University-Industry Research Roundtable titled Here or There: A Survey of Factors in Multinational R&D Location records the findings of a survey of US and European firms that recently established, or plan to establish, R&D sites in an emerging economy. The top 10 reasons for choosing a selected location were the country’s growth potential, followed by the availability of highly qualified personnel, the existence of local customers, the strength of intellectual-property protection, the ease of negotiating intellectual-property rights, the inherent cost of conducting R&D, the ease of collaborating with local universities, the availability of university faculty with scientific or engineering expertise, the absence of regulatory and other restrictions, and the suitability of the country as an export platform.

The bottom line is that the United States is today a net importer of high-technology products. It took slightly less than a decade for the US trade balance in high-technology manufactured goods to shift from a positive $40 billion in 1990 to a negative $50 billion in 2001. In fact, Americans now pay almost as much to foreign firms for imports as they pay to their own government in taxes. In a recent article, Business Week asks, “Why is that important?” and then answers its own question: “Because for the past 70 years Washington has been the 800-pound gorilla, more powerful by far than any other force in the US economy. That’s not true any more.” As USA Today (speaking of foreign financial reserves) puts it, “Developing nations have gone from beggar to banker.” Indeed, in just 7 years the United States has tripled its foreign debt. And although a great deal of attention has been focused on China and India because of their size and potential, The Economist reminds us that “these two together made up less than one-quarter of the total increase in emerging economies’ gross domestic product last year [2005].” Such is the magnitude of the competitiveness challenge that is sweeping the globe in this chaotic new-world disorder.

But is it not good that other nations prosper? In the view of the National Academies’ competitiveness committee, the answer is a resounding “Absolutely.” In a world in which half the population lives on less than $2 per day, a prosperous world will almost certainly be a safer world, not to mention a more humane world. Similarly, a prosperous world will provide more potential customers for US products and cheaper and more diverse products for US consumers. Prosperity is not necessarily a zero-sum game, but there will inevitably be winners and losers. The National Academies’ Gathering Storm committee, in its work on competitiveness, sought to ensure that America would remain among the winners.

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